Employers in the U.K. have scaled back their hiring plans amid a slump in business confidence, according to new data published on Monday that will heap even more pressure on finance minister Rachel Reeves.
A survey of recruiters by KPMG and the Recruitment and Employment Confederation (REC) found that job vacancies fell in November at its fastest pace in over four years as many firms reassessed their staffing needs following the tax hikes in the government’s budget.
Vacancies were said to have declined at a “sharp and accelerated pace,” last month, driven by an especially severe drop in demand for permanent workers.
“Businesses are having to weigh up the prospect of increasing employee costs following the budget, which has led to an accelerated slowdown in hiring activity across the board,” said Jon Holt, chief executive of KPMG in the UK.
Recruiters also reported that a growing number of redundancies had led to the steepest rise in overall staff availability for three months.
Meanwhile, business confidence has sunk to its lowest level in almost two years, as businesses face increased costs and reduced consumer demand, according to a new report by accountancy firm BDO.
BDO said its optimism index for businesses had fallen to 93.49 in November, its lowest reading since January 2023 when firms were contending with rising inflation and political instability.
“December marks the end of a tough couple of years for businesses and the drop in business confidence this month is not a surprise given the significant challenges they continue to face,” said Kaley Crossthwaite, partner at BDO.
The firm’s index for business output also contracted in November for the first time this year, signaling that the U.K. economy shrank last month.
Monday’s data serves to illustrate that taxing firms more heavily can have the unintended consequence of putting economic growth in jeopardy.
In late October, Rachel Reeves delivered her much-anticipated Autumn budget, which included £40 billion ($51 billion) in tax hikes. Employers are required to shoulder an increase to the National Insurance (NI) payroll tax while also paying higher minimum wages.
Reeves has repeatedly said the government needs to raise money to stabilize public finances and fix public services, but business groups have said the new measures introduced in the budget will force them to cut jobs and raise prices.
The Confederation of British Industry (CBI) echoed that message at its annual conference in late November, when CEO Rain Newton-Smith said that “margins are being squeezed and profits are being hit” and when you “hit profits, you hit competitiveness, you hit investment, you hit growth.”